Delfi remains one of our Top Picks for Singapore consumer counters this year.

FY18 results are above expectations.

During the year, DELFI LIMITED (SGX:P34) booked 12% y-o-y revenue growth. This was largely driven by a strong sales momentum in premium products – especially in Indonesia, where sales of its own-brand products jumped 18% y-o-y.

The regional markets recorded 10% growth in revenue, led by both own brands and agency brands. The increased contribution from premium products improved its overall gross margin by 0.6ppt.

Still positive on FY19F.

Moving into 2019, Delfi should continue to enjoy higher demand for its confectionery products, driven by solid economic growth. It will continue to right-size or reprice lower-end products to ensure they generate sufficient margins, as well.

We believe this would bring about continued improvements in gross margins.

Delfi also fully implemented the SAP system last year. As such, we believe administrative costs should remain stable for FY19.

A sweet and steady ride.

Delfi’s share price has outperformed the STI by 5.2% YTD. That said, we believe there is still room for further upside, based on its prospects for FY19. The stock is currently trading at 24x FY19F P/E, ie at a discount to its peer, Mayora Indah (MYOR IJ), which is expected to demonstrate similar earnings growth and is trading at 29x FY19F P/E.

Our Target Price of SGD1.68 implies 28x FY19F P/E, which we believe is still reasonable.

Stock analysis research and articles on this site are for the purpose of information sharing and do not serve as recommendation of any transactions. You will need to make your own independent judgment regarding the analysis. Source of the report is credited at the end of article whenever reference is made.